By Samer Hasn, Senior Market Analyst at XS.com
Gold declined by more than 1% today, trading close to $4,060 per ounce in spot markets, while still moving within a narrow consolidation range.
The continued pressure on gold prices stems largely from improving global risk appetite and fading demand for traditional safe havens that forced the correction to continue.
As investors respond to revived optimism surrounding U.S.–China trade negotiations and signs of resilience in Asia’s industrial activity, gold’s defensive appeal has weakened.
Meanwhile, softer inflation readings on Friday strengthens the case for a near-term rate cut, aligning with market expectations already reflected in CME rate futures.
The Fed is widely expected to lower its benchmark rate by 25 basis points this week. Traders will focus closely on the central bank’s tone, as any hint of a more dovish outlook could bolster gold prices by pressuring real yields and the dollar.
The Fed appears to be focusing more on maintaining economic and labor market stability than on inflation, even if it is rising. Meanwhile, weaker-than-expected inflation, coupled with signs of weakness in the economy and labor market, bolsters hope for multiple rate cuts throughout the rest of this year. This narrative still offers a strong support for gold upward rally.
However, currently, bulls on CME gold futures seem to be exhausted after the long rally and bears are able to push again. The On-Balance Volume (OBV) indicator for has been gradually stabilizing as prices move within a narrow range following the strong rally that started in September. This flattening in OBV suggests that buying and selling pressures are reaching an equilibrium, with neither side showing clear dominance.
If OBV begins to rise again while prices hold steady, it could indicate quiet reaccumulation beneath the surface. This can be a sign that institutional buyers might be positioning for another leg higher once a breakout occurs.
The current corrective rally will likely depend on continued trade progress and supportive monetary policy from central banks.
On the trade front, U.S. and Chinese trade negotiators concluded recent talks on a positive note, expressing confidence in a preliminary framework for the upcoming Trump–Xi summit. Discussions reportedly addressed a wide range of sensitive topics including tariff suspensions, export controls, agricultural imports, and the regulation of rare-earth minerals and TikTok.
Although optimism has grown that the threatened 100% U.S. tariffs on Chinese goods may be postponed, both sides acknowledge that several structural issues remain unresolved. The tone of the talks helped ease some of the immediate market tension, yet investors remain cautious, waiting for formal agreements before reassessing risk exposure.
Meanwhile, as The Wall Street Journal reported, China has adopted a more assertive diplomatic stance toward Washington, combining firm retaliation with selective concessions. President Xi Jinping’s strategy, which uses rare-earth export controls as leverage while offering limited gestures such as progress on TikTok negotiations, aims to project both resilience and flexibility.
The approach seeks to extract tangible U.S. concessions ahead of the Trump–Xi summit, yet it also risks alienating Western allies wary of Beijing’s tactics. Within the U.S. administration, business interests appear to have gained influence, softening some hawkish positions on technology exports and signaling that short-term political goals may be taking precedence over longer-term strategic competition.
Supporting the improved sentiment, China’s industrial sector has shown remarkable resilience. Official data revealed that industrial profits surged 21.6% in September following a 20.4% increase in August, marking the second consecutive month of double-digit growth. The gains were supported by government measures aimed at reducing excess capacity and encouraging innovation in key manufacturing segments.